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BRAZIL ECONOMICS - Report 01 Dec 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

Brazil’s fiscal situation is fragile and requires deep adjustments. Although the government should meet its target in 2025, not only has the target itself lost its meaning, but—yet more importantly—the result remains far from satisfactory, with a growing primary deficit feeding the rapid expansion of public debt. For 2026, the outlook is even more unfavorable, and our projection points to a deficit larger than this year’s. The fiscal path from 2027 onward will depend crucially on the election outcome. In the event of Lula’s reelection, there is no reason to anticipate any change in the orientation of fiscal policy. Even with a change in government, the magnitude of the challenge suggests that fiscal risks will remain significant.

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